HONG KONG, Nov. 15, 2007 (PRIME NEWSWIRE) -- Highway Holdings Limited (Nasdaq:HIHO) today reported results for its second fiscal quarter ended September 30, 2007, reflecting the benefits of its strategy to increase sales by expanding the company's original equipment manufacturing capabilities and customer base.
Net sales for the 2008 fiscal second quarter climbed 18.4 percent to $8.8 million from $7.4 million a year ago. Net income for the same period was $83,000, or $0.02 per diluted share, compared with net income of $188,000, or $0.05 per diluted share, last year.
Net sales for the first six months of fiscal 2008 increased 20.4 percent to $17.7 million from $14.7 million a year earlier. Net income for the same period was $331,000, or $0.09 per diluted share, compared with $758,000, $0.21 per diluted share, in the first half of fiscal 2007.
"Metal, mechanical and electronic OEM sales for the six months represented approximately $16.8 million, or 94.9 percent of the company's total net sales, which further underscores the company's successful transition away from non-core businesses to its original equipment manufacturing operations," said Roland Kohl, president and chief executive officer.
Gross profit for the quarter increased 12.8 percent to $1.65 million from $1.46 million last year, reflecting the benefits of OEM sales initiatives. Gross profit as a percentage of sales was 18.8 percent compared with 19.7 percent in the same period a year ago, due primarily to manufacturing cost increases - such as labor, transportation and raw materials, which cost increases could not all be passed on to customers.
Selling, general and administrative expenses increased by $353,000 for the fiscal quarter and $704,000 for the current six-month period primarily due to the additional general and administrative expenses related to the new Golden Bright Plastic Manufacturing division that Highway Holdings acquired in September 2006. In addition, the higher general and administration expenses also reflect the initial costs of restructuring and integrating the systems of the Golden Bright Plastics division and new Wuxi Metal division that was established in 2006. Kohl noted that the expenses necessary to restructure certain aspects of both acquired operations were higher than anticipated. "We believe the most difficult tasks are now behind us, and we are optimistic that our investments will produce solid contributions over the long term," Kohl said.
Kohl noted the company's balance sheet remains strong. The total shareholders' equity at September 30, 2007 was $12.37 million compared with $12.17 million at 2007 fiscal year end. The company's current ratio was 1.98:1 at September 30, 2007.
Kohl reiterated a previous comment concerning raw material costs, which have continued to increase during the past 18 months -- particularly oil prices throughout China and the inflationary effect on operating costs, such as transportation, labor and electricity. He added that these additional expenses are impacting Highway Holdings, as well as the company's competitors.
He added that new Chinese governmental rules and regulations, such as the imposition of new customs deposits on imports and for some exported materials and goods, as well as increased enforcement of new and existing labor laws and regulations, have adversely affected the business environment and resulted in higher costs and potential operating liabilities. These governmental actions have recently impacted the operating costs of all companies located in the coastal areas of China. The company has not yet been able to pass all of the cost increases through to all of its customers, but management is working diligently with these customers to address these higher expenses. "While the situation is potentially detrimental, Highway Holdings might benefit from the elimination of less financially strong competitors that are unable to absorb the incremental costs," Kohl said.
About Highway Holdings
Highway Holdings produces a wide variety of high-quality products for blue chip original equipment manufacturers -- from simple parts and components to sub-assemblies. It also manufactures finished products, such as LED lights, radio chimes and other electronic products. Highway Holdings is headquartered in Hong Kong and operates four manufacturing facilities in the People's Republic of China.
Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements which involve risks and uncertainties, including but not limited to economic, competitive, governmental, political and technological factors affecting the company's revenues, operations, markets, products and prices, and other factors discussed in the company's various filings with the Securities and Exchange Commission, including without limitation, the company's annual reports on Form 20-F.
HIGHWAY HOLDINGS LIMITED AND SUBSIDIARIES
Consolidated Statement of Income
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
------- ------- ------- -------
2007 2006 2007 2006
------- ------- ------- -------
Net sales $ 8,796 $ 7,428 $17,728 $14,723
Cost of sales 7,145 5,964 14,261 11,733
------- ------- ------- -------
Gross profit 1,651 1,464 3,467 2,990
Selling, general and
administrative expenses 1,596 1,243 3,134 2,430
------- ------- ------- -------
Operating income 55 221 333 560
Non-operating items
Interest expenses (63) (54) (122) (101)
Exchange gain (loss), net 74 (22) 82 226
Interest income 17 35 50 81
Other income 0 8 7 18
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Total non-operating
income (expenses) 28 (33) 17 224
Net income before income tax 83 188 350 784
Income taxes 0 0 19 26
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Net income $ 83 $ 188 $ 331 $ 758
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Earnings per share
- basic $ 0.02 $ 0.05 $ 0.09 $ 0.21
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Weighted average
number of shares
- basic 3,785 3,611 3,785 3,611
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Earnings per share
- diluted $ 0.02 $ 0.05 $ 0.09 $ 0.21
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Weighted average
number of shares
- diluted 3,817 3, 611 3,817 3,611
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HIGHWAY HOLDINGS LIMITED AND SUBSIDIARIES
Consolidated Balance Sheet
(In thousands, except per share data)
Sept. 30, March 31,
2007 2007
-------- --------
(Unaudited)
Current assets
Cash and cash equivalents $ 3,907 $ 5,299
Restricted cash 1,350 1,221
Accounts receivable, net of doubtful accounts 5,309 4,742
Inventories 6,857 6,104
Short term investment 318 316
Prepaid expenses and other current assets 1,091 680
-------- --------
Total current assets 18,832 18,362
Property, plant and equipment, net 3,685 3,980
Industrial property rights 61 70
Investment and advance in affiliate 2 2
-------- --------
Total assets $ 22,580 $ 22,414
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Current liabilities:
Accounts payable $ 4,205 $ 3,990
Short-term borrowing 2,807 3,097
Current portion of long-term debt 359 478
Accrued mould charges 344 253
Accrual payroll and employee benefits 405 446
Income tax payable 19 0
Other liabilities and accrued expenses 1,356 1,154
-------- --------
Total current liabilities 9,495 9,418
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Long-term liabilities:
Long-term debt 544 655
Deferred income taxes 174 174
Shareholders' equity:
Common shares, $0.01 par value, authorized
20,000,000 shares 38 38
Additional paid-in capital 11,304 11,304
Retained earnings 1,635 1,439
Accumulated other comprehensive income (44) (48)
Subscription receivable (513) (513)
(53) (53)
Treasury shares, at cost - 37,800 shares
-------- --------
Total shareholders' equity 12,367 12,167
-------- --------
Total liabilities and
shareholders' equity $ 22,580 $ 22,414
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